One reason I am skeptical of the $ES pump being permanent is the “size” of the correction. Many Elliotticians expect this to be intermediate four, in which case we need to have something really big. Fall of last year big. And this correction is not that big yet, by any stretch.
And even my more bullish count—merely minor 4—we’re still not big enough. We’re not going to get to 5000 without washing more people out. That correction was scary, but just not that scary.
The second reason is the equity put-to-call ratio. It got a little elevated, but—again—for a correction of the magnitude I’m expecting, it should have gone to 1. Far lesser pullbacks have gotten us there. It only briefly got up to 0.85, even with the most selling we’ve seen in months, and even after taking out a prior low for the first time in over a year, and even after breaking a primary trend line from the March lows. That means that despite all those negative technicals, everyone called bullshit and expected the bounce. Not enough people got short, in my opinion.
Using the bull wedge (or some other approximate structure like it) above, I would like to see two more failures, giving us a 3-wave move to the lower trend line to suck more people in before I will have a lot of confidence that we can go a lot higher from here.
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